The corporate board not only helps lay out the firm’s strategic goals but provides
oversight as well. The board’s responsibility is to make sure that the firm implements a strategy that is consistent with its philosophy and strategic management framework and can be implemented by the management and staff with sufficient expertise and resources. Hence, the board sets the direction and provides oversight and control, while the management carries out the board directives and manages the daily affairs of the firm.

Against this backdrop, the authors, Susan S Lightle, Joseph Castellano, Bud Baker and Robert J Sweeney, of the first paper, “The Role of Corporate Boards in Employee Engagement”, have attempted to highlight the growing recognition of the importance of employee engagement and emphasized the need to recognize it as a legitimate area of interest for boards of directors. The study also underscores that the boards have a duty to ensure that the top management makes such engagement a priority. Though a conceptual paper, the major value addition of it is in its contention that the importance of employee engagement needs to become a part of a board’s regular corporate governance repertoire. The paper stresses that failing to do so is to ignore the demonstrated connection between employee engagement and the financial performance of the firm. Thus, the paper recommends a new role for boards of directors and concludes with an anecdotal example from the healthcare industry. Interestingly, it throws open a wide array of research opportunities for further exploration.

Following this, we have another interesting paper, “The Impact of Board Characteristics on Corporate Governance and Disclosure Practices of Firms Listed in Indian Stock Exchange”, wherein the author, Pankaj M Madhani, has examined the influence of internal corporate governance mechanisms such as board characteristics on corporate governance and disclosure practices of firms. The effectiveness of corporate governance mechanism in maintaining a healthy relationship between the management and the shareholders depends significantly on board effectiveness. Two major attributes that affect a board’s effectiveness are board size and its composition. Hence, the research focuses on this aspect and identifies the relationship between board characteristics, i.e., board size and board composition and corporate governance and disclosure practices, by studying a sample of 54 firms listed in the Bombay Stock Exchange (BSE). A clear picture emerges from the findings that in the Indian scenario, there is no statistically significant difference between the corporate governance and disclosure practices of firms with higher proportion of independent directors and firms with lower proportion of independent directors (i.e., board composition). However, the study finds a statistically significant difference between the corporate governance and disclosure practices of firms with larger board size and firms with smaller board size.

In the last paper, “Voluntary Disclosure of Human Capital: Evidence from India”, the authors, Sanjay Kumar Mishra, Arti Devi and Archana Gupta, have investigated the impact of human capital disclosure on the market value of the firms. In the knowledge-based economy, human capital has emerged as an important source of sustainable competitive advantage. The study, examining the human capital disclosure level for Indian firms listed in National Stock Exchange (NSE) Nifty 50 index, finds that the theme of ‘employee compensation and benefit’ is the most reported content of human capital disclosure, followed by ‘training and development’. However, ‘work place safety initiative’ is found to be the least reported content of human capital disclosure. The research has developed the Human Capital Disclosure Index (HCDI) for the sample Nifty firms and identifies that knowledge-intensive industry like computer and software industry has the highest average HCDI score, followed by banking and pharmaceutical industries. The findings also reveal that the determinant of human capital disclosure such as investment on human capital (measured in terms of ‘employee expense as a proportion of its total operating expense’) has a significant positive impact on HCDI as such firms tend to disclose more on human capital in their annual reports. Finally, the study concludes that in the Indian context, there is no significant impact of human capital disclosure on the market value of the firms.

--Pankaj M Madhani
Consulting Editor